New rules on mandatory auditing for Russian companies

When determining whether a Russian company is subject to mandatory auditing, the criteria taken into account are company’s income for the year preceding the reporting year (i.e. taxable income for the purposes of Russian profits tax), and the balance sheet value of the company’s assets at the end of the year preceding the reporting year.

The thresholds are as follows:

• Revenue: RUB 800 million;
• Balance sheet value of assets: RUB 400 million.

Should any of the above thresholds be exceeded, the company shall be subject to mandatory auditing.

Prior to 2022, all Russian joint-stock companies (both public and private) were required by law to conduct mandatory audits of annual financial statements.

Starting from the financial reporting for 2022, however, private joint-stock companies are no longer subject to mandatory auditing by default. Following this amendment such companies are now subject to the above criteria for mandatory auditing applicable to other Russian organisations (e.g. limited liability companies).

Not all of private joint-stock companies are exempted from the mandatory auditing. If shares of such company are owned by the Russian Federation, a constituent entity of the Russian Federation or a municipal entity of Russia, and/or if shares of such company are listed, the obligation to conduct mandatory audits still applies. Mandatory auditing for public joint-stock companies remains unchanged in 2023.

The following organisations, among others, are obliged to conduct audits of financial statements regardless of their forms of incorporation or their income and balance sheet value of assets:

• banks and bank holdings;
• insurance companies;
• developers performing shared construction projects;
• professional stock market actors;
• gambling and lottery organisations;
• credit reference bureaus;
• microfinance organisations;
• companies that submit consolidated statements;
• Russian funds if the value of property, including cash, received during the year preceding the reporting year exceeds RUB 3 million.

In our experience, subdivisions of foreign companies in Russia rarely fall withing the scope of mandatory audit, and usually conduct them only when exceeding the above thresholds regarding revenue or value of assets. The aforementioned amendments may be described nonetheless as a reduction of the administrative burden on businesses, which is a welcome change.